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 After President Obama came out squarely against the bonuses for American International Group Inc.'s (NYSE:AIG) employees -- particularly those in the financial products division that sold all those credit default swaps -- the blogosphere has come up with plenty of ways for Uncle Sam to put a stop to the bonus bonanza. A round up of suggestions include Felix Solomon from Portfolio.com advocating playing hardball with AIG employees: "And it might just be the case that AIG's contractual obligation to make the bonus payments is a bit like an underwater homeowner's contractual obligation to make his mortgage payments. If AIG simply didn't pay the bonuses, would the employees of the financial products arm really fancy their chances in court were they to sue to receive them? From the Huffington Post: "Remember that this is a firm that is 79.9% owned by the United States government. It is therefore quite possible to abort this outrage by decisive exercise of public authority. Within existing law, there is more than one way to do it, but a direct solution is readily at hand: Firstly, the US trustees in charge of the firm must immediately instruct the corporate treasurer to make no payments of any bonuses. They also need to order him to issue stop payment orders on any checks that fly out the door at the last minute, as with Merrill Lynch. Then the trustees need to split off the derivatives unit from the rest of the firm and separately incorporate it. This step leaves AIG's other businesses free to operate as usual. If the recipients of the bonuses refuse to waive them, then the derivatives unit should at once be thrown into bankruptcy, terminating all obligations to pay them. Right now, press reports suggest that the firm's top management waited until the last minute to inform the government of what was happening. AIG CEO Edward Liddy, accordingly, should be asked to resign at once, for the sake of public confidence and to send a clear signal that gaming the system is unacceptable." Laura Wilson of Information-Security-Resources.com says: "AIG Is Obligated To Pay Bonuses? Bull! ... Any attorney who advises that these bonuses are appropriate ought to have his or her head checked. Base salary, maybe, if not outrageous. No bonus. No severance unless everybody else also received proportionate assistance. Don't care what the contract says -- attack it in bk or wind down -- I saw it many times in the Silicon Valley meltdown." While the AIG bonuses have spurred outrage across the country, there are those saying that -- while distasteful -- contracts need to be honored. - George White See Portfolio.com post See Huffington Post See Information-Security-Resources.com post See NY Times story
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